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Author Question: What is meant by diversifying an investment portfolio? What are the advantages of diversification? ... (Read 48 times)

storky111

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on: Jun 29, 2018
What is meant by diversifying an investment portfolio? What are the advantages of diversification?
 
  What will be an ideal response?

Question 2

If the economy were truly made of industries that fit the textbook definition of perfect competition what do you expect would be a major disadvantage of this from the consumer's perspective?
 
  What will be an ideal response?


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Tonyam972

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Diversification means that investors spread their investment across more than one asset. Diversification allows investors to reduce risk as individual assets are hit by different economic shocks. Putting a little bit of money in all of these different investment baskets reduces exposure to any single shock.
A-head: DIVERSIFICATION
Concept: Diversification

Answer to Question 2

One of the assumptions of perfect competition is that the products are all homogeneous. This would clearly reduce product variety across industries and eliminate consumer choice.


storky111

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Reply #2 on: Jun 29, 2018
Thank you :)


Tonyam972

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Reply #3 on: Jun 29, 2018
Happy to help you


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